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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes
Note 12 — Income Taxes
Cleco
The following table presents a reconciliation of income tax (benefit) expense at the statutory rate and income tax (benefit) expense on (loss) income from continuing operations reported on Cleco’s Consolidated Statement of Income:

FOR THE YEAR ENDED DEC. 31,
(THOUSANDS, EXCEPT PERCENTAGES)202320222021
(Loss) income from continuing operations before income taxes
$(94,942)$253,183 $161,346 
Statutory rate21.0 %21.0 %21.0 %
Tax (benefit) expense at federal statutory rate
$(19,938)$53,168 $33,883 
Increase (decrease)
Flowthrough of tax benefits(7,847)(12,272)(356)
State income taxes, net of federal benefit(2,256)16,519 9,666 
Return to accrual adjustment(30)(378)(3,852)
Permanent adjustments(388)(4,621)436 
Amortization of excess ADIT(33,518)(32,639)(37,254)
Other, net(1,096)258 (1,190)
Total tax (benefit) expense
$(65,073)$20,035 $1,333 
Effective rate68.5 %7.9 %0.8 %
Information about current and deferred income tax expense from continuing operations is as follows:

FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)202320222021
Current federal income tax (benefit) expense
$(45,429)$25,478 $26,173 
Deferred federal income tax benefit
(7,137)(9,835)(44,464)
Amortization of accumulated deferred investment tax credits
(127)(134)(141)
Total federal income tax (benefit) expense $(52,693)$15,509 $(18,432)
Current state income tax (benefit) expense
(9,787)10,326 4,158 
Deferred state income tax (benefit) expense (2,593)(5,800)15,607 
Total state income tax (benefit) expense
$(12,380)$4,526 $19,765 
Total federal and state income tax (benefit) expense
$(65,073)$20,035 $1,333 
Items charged or credited directly to member’s equity
Federal deferred income tax
(1,374)6,297 514 
State deferred income tax
(531)2,431 (120)
Total tax (benefit) expense from items charged directly to member’s equity
$(1,905)$8,728 $394 
Total federal and state income tax (benefit) expense
$(66,978)$28,763 $1,727 

The balance of accumulated deferred federal and state income tax assets and liabilities at December 31, 2023, and 2022 was comprised of the following:

AT DEC. 31,
(THOUSANDS)20232022
Depreciation and property basis differences
$(764,958)$(869,796)
Net operating loss carryforward57,464 135,914 
NMTC78,955 88,245 
Fuel costs232 (41,233)
Other comprehensive income5,927 4,022 
Regulated operations regulatory liability, net
(161,427)(114,711)
Postretirement benefits
38,282 38,418 
Merger fair value adjustments(46,052)(47,929)
Other(9,820)(13,230)
Accumulated deferred federal and state income taxes, net
$(801,397)$(820,300)

Cleco Power
The following table presents a reconciliation of income tax (benefit) expense at the statutory rate and income tax (benefit) expense on (loss) income reported on Cleco’s Consolidated Statement of Income:

 FOR THE YEAR ENDED DEC. 31,
(THOUSANDS, EXCEPT PERCENTAGES)202320222021
Income before tax$132,715 $172,560 $124,735 
Statutory rate21.0 %21.0 %21.0 %
Tax expense at federal statutory rate
$27,870 $36,238 $26,194 
Increase (decrease)  
Flowthrough of tax benefits(7,847)(12,272)(356)
State income taxes, net of federal benefit
12,296 12,109 6,343 
Return to accrual adjustment
(204)14 (3,831)
Amortization of excess ADIT(33,518)(32,639)(37,254)
Other, net(3,031)(947)(449)
Total tax (benefit) expense
$(4,434)$2,503 $(9,353)
Effective rate(3.3)%1.5 %(7.5)%
Information about current and deferred income tax expense is as follows:

 FOR THE YEAR ENDED DEC. 31,
(THOUSANDS)202320222021
Current federal income tax expense
$11,188 $4,921 $— 
Deferred federal income tax benefit(20,029)(1,926)(23,071)
Amortization of accumulated deferred investment tax credits
(127)(134)(142)
Total federal income tax expense (benefit) $(8,968)$2,861 $(23,213)
Current state income tax expense
5,617 2,406 — 
Deferred state income tax (benefit) expense(1,083)(2,764)13,860 
Total state income tax expense (benefit)
$4,534 $(358)$13,860 
Total federal and state income tax expense (benefit)$(4,434)$2,503 $(9,353)
Items charged or credited directly to members’ equity
  
Federal deferred income tax
(528)2,610 1,714 
State deferred income tax
(208)1,008 338 
Total tax expense from items charged directly to member’s equity
$(736)$3,618 $2,052 
Total federal and state income tax expense (benefit) $(5,170)$6,121 $(7,301)

The balance of accumulated deferred federal and state income tax assets and liabilities at December 31, 2023, and 2022 was comprised of the following:
AT DEC. 31,
(THOUSANDS)20232022
Depreciation and property basis differences
$(699,020)$(754,200)
Net operating loss carryforward35,359 94,555 
Fuel costs1,652 (13,594)
Other comprehensive income3,336 2,604 
Regulated operations regulatory liability, net
(161,427)(114,711)
Postretirement benefits
25,005 24,946 
Other(11,465)(9,727)
Accumulated deferred federal and state income taxes, net
$(806,560)$(770,127)

Valuation Allowance
Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not
be realized. At December 31, 2023, and 2022, Cleco had a deferred tax asset resulting from a NMTC carryforward of $79.0 million and $88.2 million, respectively. If the NMTC carryforward is not utilized, it will begin to expire in 2030. Management considers it more likely than not that the deferred tax asset related to the NMTC carryforward will be realized; therefore, no valuation allowance has been recorded for Cleco and Cleco Power.
Quarterly, management closely monitors and evaluates the realizability of deferred tax assets, and adjustments are recorded as appropriate in future periods. In evaluating the need for a valuation allowance, management considers various factors, including the expected level of future taxable income, available tax planning strategies, and reversals of existing taxable temporary differences. If such estimates and related assumptions change in the future, Cleco and Cleco Power may be required to record a valuation allowance against its deferred tax assets, resulting in additional income tax expense in Cleco’s and Cleco Power’s Consolidated Statements of Income.

Net Operating Losses
For the 2022 tax year, Cleco created a federal net operating loss of $538.5 million and a state net operating loss of $348.2 million. For the 2023 tax year, Cleco expects to utilize a federal net operating loss of $318.0 million and a state net operating loss of $199.6 million.
For the 2022 tax year, Cleco Power created a federal net operating loss of $336.1 million and a state operating loss of $348.2 million. For the 2023 tax year, Cleco Power expects to utilize a federal net operating loss of $220.8 million and state net operating loss of $199.6 million.
Both the federal and state net operating losses may be carried forward indefinitely. Cleco and Cleco Power consider it more likely than not that these income tax losses will be utilized to reduce future income tax payments, and the entire net operating loss carryforward will be utilized.

Uncertain Tax Positions
Cleco classifies all interest related to uncertain tax positions as a component of interest payable and interest expense. At December 31, 2023, and 2022, Cleco and Cleco Power had no interest payable related to uncertain tax positions. For the years ended December 31, 2023, 2022, and 2021, Cleco and Cleco Power had no interest expense related to uncertain tax positions. At December 31, 2023, and 2022, Cleco and Cleco Power had no liability for unrecognized tax positions.

Income Tax Audits
Cleco participates in the IRS’s Compliance Assurance Process in which tax positions are examined and agreed upon prior to filing the federal tax return. While the statute of limitations remains open for tax years 2020, 2021, and 2022, the IRS has placed Cleco in the Bridge phase of the Compliance Assurance Process for the 2020 and 2021 tax years. In this phase, the IRS will not accept any disclosures, conduct any reviews, or provide any assurances. These tax returns were filed consistent with the IRS’s review. The IRS has accepted Cleco’s application for the Compliance Assurance Process for the 2022 tax year and the Compliance Assurance Maintenance phase for the 2023 tax year. In this maintenance phase, the IRS typically will, at its discretion, reduce the level of its review of the tax year relative to the regular Compliance Assurance Process phase.
The state income tax years 2020, 2021, and 2022 remain subject to examination by the Louisiana Department of Revenue.
Cleco classifies income tax penalties as a component of other expenses. For the years ended December 31, 2023, 2022, and 2021, no penalties were recognized.